Less than a month after Silicon Valley Bank and Silvergate declared bankruptcy, Credit Suisse, a financial empire with more than 167 years of credit and investment history, collapsed completely in 72 hours. This bank has long been known as the talented child of the world’s financial market, with a series of uncountable scandals. Why is Credit Suisse bankrupt now?
1. Financial situation
Credit Suisse shares are now just $0.82 in 2023 compare to a stock price peak of $77 in 2007, 16 years ago – which is the bank’s 20-year peak time.
Loss of $5.5 billion due to the collapse of Archegos hedge fund in 2021, as well as the collapse of Greensill Capital, which packaged virtual loans and sold to investors at Credit Suisse
Customers race to withdraw at this bank. The lender confirmed last month that clients had pulled out 110 billion Swiss francs ($118.71 billion) of funds in the fourth quarter while the bank reported an annual loss of 7.29 billion Swiss francs ($7.87 billion), its largest since 2007-08 financial crisis.
2. Acquired by UBS
On March 19, UBS agreed to spend $3.2 billion to buy Credit Suisse, in a historic deal brokered by the Swiss government. Swiss authorities had to race against time to find a way to rescue Credit Suisse, preventing the financial crisis from spreading globally. If an agreement cannot be reached with UBS, Credit Suisse is likely to be nationalized.
This ended Credit Suisse’s 167 years of independent existence. CEO Ulrich Koerner was unable to reverse the situation for this bank in the face of a wave of customer withdrawals since the end of last year. A series of scandals, from investment losses, staff cuts, and leadership changes to litigation, have made customers lose confidence in Credit Suisse.
3. Looking back and implications for Vietnam
Both Credit Suisse and UBS are among the top 30 largest banks in the world and have been plagued by many scandals during their operating time. This merger has also reassured the world financial system to some extent.
If the risk management ability of UBS and Credit Suisse is still poor from credit risk, operational risk to market risk, if the same situation happens next time, the Swiss government may still Can you help me anymore and the consequences and effects on the world economy and finance are huge
In Vietnam, there are many businesses that have used Credit Suissee’s services such as Novaland, VinFast Trading and Investment Pte. Ltd., Masan Group and FLC.
In the ecosystem of Vietnamese commercial banks, securities companies are not the mainstay, but the decrease in profits is becoming a sign similar to the case of Credit Suisse and Archegos Capital Management.
Its impact on Vietnam is not direct, but investor sentiment may shake by a series of bad news about the banking industry from the beginning of the year to now. Besides, negative information in the market also affect the confidence of investors and depositors since the beginning of 2022 until now, such as the situation of bad debts tending to increase sharply. Currently, the bad debt balance of 27 listed banks by the end of 2022 has increased by 35% compared to the beginning of the year.
Harley Miller Law Firm “HMLF”
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